New teacher contracts illustrate challenge of saving

House Education
The House Education Committee. On Wednesday members heard from the Joint Fiscal Office about teacher health insurance. File photo by Tiffany Danitz Pache/VTDigger
Numbers from current contract talks and legislative analysts may provide fodder to both sides in the debate over the governor’s call for statewide bargaining of teacher benefits.

The results of contract negotiations are in from eight school districts, and they do not bode well for the argument that millions of dollars in savings can still happen at the local level. At the same time, a Joint Fiscal Office analysis of the governor’s proposal says the $26 million savings he predicts depends on key assumptions holding true.

Gov. Phil Scott’s standoff with legislative leaders over how to handle bargaining has delayed adjournment.

Not all eight new contracts are ratified, but three adopted the 80/20 premium split the governor envisions to maximize savings, and one is very close with an 81/19 split. The rest hover around the current statewide average split of 84/16, with the employer paying the bulk.

Generally, the new contracts all pay more for teachers’ out-of-pocket expenses than the governor has proposed doing, and salary increases hover around 3 percent, except for one that is below 2 percent.

Jeff Francis, executive director of the Vermont Superintendents Association. File photo by Amy Ash Nixon/VTDigger
“It is hard to envision maximizing savings in this transition if every system negotiates its own deal,” said Jeff Francis, head of the Vermont Superintendents Association and an advocate for statewide bargaining of health benefits.

No matter what, the new health care plans being offered by the Vermont Education Health Initiative have less expensive premiums and higher out-of-pocket costs. The current plans are being phased out because of a number of factors, one being the Affordable Care Act’s excise tax, which has since been delayed until 2020.

VEHI has estimated $75 million in potential savings for the first year of the new plans if all school employees share an 80/20 split with the state and get no out-of-pocket help. Currently, teachers pay about $400 for out-of-pocket expenses.

Mark Perrault, analyst with the Joint Fiscal Office, told the House Education Committee on Wednesday that the governor’s plan to capture up to $26 million in savings is based on a series of assumptions.

First it assumes that the state would negotiate an 80/20 split on the premiums, or that every school district would come up with the same exact split — something that has not happened in the eight completed contracts.

The current average premium split on the plans that are going away is 86/14. Because the new plans have lower premiums, increasing the percentage teachers pay in won’t increase their payments, according to the JFO’s analysis.

“Shares are reallocated [under the governor’s plan] so they are held where [teachers] are right now,” he said.

Gov. Phil Scott. File photo by Elizabeth Hewitt/VTDigger
The governor is proposing the state put nearly $50 million of the $75 million into health savings accounts for teachers to pay out-of-pocket costs. Perrault said that means teachers “are basically treated the same as they are right now” under Scott’s plan.

The risk in the governor’s assumption is that the state could fail to negotiate the 80/20 premium split or specific out-of-pocket costs, or that localities might give some savings back in higher salaries.

“If a district ends up making up some of the change in health care benefits in salary, then it is a wash,” Perrault said, adding that the plans that have already finished up have “pretty generous” salaries.

But savings are also jeopardized by local districts negotiating health care, he said. “If employers pay more than 80 percent of the premium, if they don’t go with an 80/20 split but remain somewhere in between, it will erode the savings,” Perrault told lawmakers.

The final assumption is that teachers would use their health care differently than they do now because of incentives in the new health plans, according to Perrault.

The new plans encourage users to choose an urgent care center over the emergency room or a generic over brand name drug.

The risk is that they don’t change their ways or that school districts choose to cover 100 percent of employees’ out-of-pocket costs, because that will result in school districts paying more than they do now. At least one of the eight contracts picks up 100 percent of out-of-pocket costs.

If teachers end up using more than their insurer — Blue Cross Blue Shield of Vermont — expects, then premiums will rise in the future, and things could go right back to where they were with the old plans. Over the years, premium increases have averaged 6.5 percent a year, according to VEHI CEO Laura Soares.

When looking at individual years, premium increases have dipped as low as zero and gone as high as 23 percent since 2000.

During the last legislative session, lawmakers had to lift caps on the growth of local education spending partly because of an unexpected 8 percent increase in teacher health care costs.

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Tiffany Danitz Pache

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  • Terry_Burdick

    Our appropriation system is backwards.

    The governor or the legistlators or the public via internet voting should set the budget
    and then the legistlators allocate that money to various departments.

    The local school boards can take their allocation and decide how many teachers they can afford based upon salaries and healthcare demands.

    • Jason Brisson

      I like it, true democracy of the dollar. Taking our hard earned $$ may be inevitable, but you need to spend it how we say!

  • Paul Richards

    “Currently, teachers pay about $400 for out-of-pocket expenses.”
    I should not be forced against my will to fund this exclusive, discriminatory sweetheart deal while my out of pocket expense is $7,150. These people are no better or deserving than any other Vermonter. This is only one of many exclusive, discriminatory sweetheart deals these people get at our expense. Time to get real and end the monopoly.

  • John Freitag

    Simple answer to the question of how much savings. Go to statewide negotiations and put all the savings into the underfunded teachers retirement fund. In helping to make solvent this existing obligation there is no need to worry about budgeting about how much will be saved and pressure to raise property taxes to pay for this obligation, as was done in the Senate’s passed budget, will be eliminated.

  • John farrell

    Teachers are NOT special when it comes to healthcare. They should be paying more for their health care costs just like the COMMON WORKING PERSON!